I’m not really up to speed on this idea, and not as smart as other contributors at FDL, but here in Texas we are fighting to keep foreign companies, in partnership with our state department of transportation, from seizing private property by eminent domain to build huge toll roads some of which will traverse the United States from Canada to Mexico. My concern is that tampering with the eminent domain process even with the best of intentions might down the road cause more harm than good.

I will admit I could be way off on this, but as they say, “road to hell is paved with good intentions”.

Eminent domain? That’s what the hydrofracking gas companies are using to seize land to build a large pipeline from the Marcellus Shale wells to New England. Gee. The White House supports gas drilling corporations (against all scientific studies and past experience with polluting acquifers) but not home owners??? Duh-oh! It is the corporations and the banks who get the White House’s support every time.

Let’s just ask a simple question here that a lot of people seem to be missing: how does this private equity partner plan on making its 5% commission on every home seized?

A: The city is planning on seizing the home from investors at an “appraised” price, and then immediately turning around “refinancing” the home to the FHA (the feds) at a much more inflated price. The country and this private entity working with the county will take their fees and costs from that arbitrage. Meanwhile if anything goes wrong in the process (and plenty will), the country will eat the losses generated while the private parties involved face no risk.

Even as corrupt and duplicitous as the feds are, it’s hard to believe that they’d sit idly by and let this nonsense happen, especially when they’re going to be one of the designated bag holders in this transaction, and especially not when Obama isn’t even getting any kickbacks from this particular scheme.

When has the White House ever thought that helping individual citizens was a good idea?

“… tampering with the eminent domain process even with the best of intentions might down the road cause more harm than good.”

Too late. Over 60 private homes were condemned under eminent domain to build Jerry Jones’ football palace.

I think the MRP proposal is faulty on the specifics. Geithner clearly thinks eminent domain as a concept to fight foreclosures is faulty, because banks might have to take a loss for a change.

Well wouldn’t that be too damn bad.

World’s smallest violin paying just for them.

If Willie Brown is an investor in MRP, this will surely be “Crony Capitalism” at it’s most virulent! Beware.

Would indeed be a deviation from their usual position.

Gotta be a catch.

Geithner clearly thinks eminent domain as a concept to fight foreclosures is faulty, because banks might have to take a loss for a change.

Can’t have that. Timmy, always looking out for his buds. But, let’s not forget to thank his boss, too.

Willie Brown….do-gooder or scurilous carpetbagger?

All desperation to avoid the obvious use of eminent domain. Since the whole housing market has been one nexus of capitalist scamming, though, “national security” obviates any judicious response.

Do-Gooder, for himself.

Thanks for the post David. Interesting read.

The Obama administration has concerns with a proposal—backed by a one-time major fundraiser to President Barack Obama—that would use eminent domain to seize and restructure mortgages, according to a White House official…

In addition to comments regarding Geithner and banks taking a loss, I wonder whether the “one-time major fundraiser” part plays a role here. Sounds like he’s not drawing the water for Obama’s campaign like he once did.

Or maybe Zero just steering clear of pre-election cronyism optics.

Speculating:

MRP lends money to the county to pay off the holders of the loans.

I’m willing to bet that a percentage of the homes become “owned” by MRP if the homeowners cannot qualify for a new mortgage.

The county would deed the home to MRP for “forgiveness” on that part of the debt.

There are a huge number of newer (built since 2000) homes in the Victor Valley which yield positive cash flow immediately if bought at current prices by investors.

The question is not about the value of the house, that is easy. The question is what is the value of a performing loan? One could argue (and the Banks do assert this) it is the face value of the note until the loan falls into default.

So why aren’t the investors buying? Do they want the security of the gov’t's involvement in the loan?

The question is not about the value of the house, that is easy. The question is what is the value of a performing loan? One could argue (and the Banks do assert this) it is the face value of the note until the loan falls into default.

I think you hit the nail on the head, the cities won’t be able to forcibly buy performing mortgages at a discount.
What’s so snake eyed about this deal (leaving aside the no-bid crony contract aspect of it all) is that its using eminent domain to seize intangible personal property instead of real property. Certainly the state has the power to do this, but it also has a 5th Amendment duty to pay “just compensation”.

The property owner has the right to challenge the state’s valuation in court, I can’t imagine a judge letting the state take a current mortgage for less than the value of a current mortgage (since the state is forcing the mortgage holder to sell, the court’s valuation will assume the mortgage would have remained current).

The only reason I’d like to see this happen would be to enjoy watching the biggest courtroom trainwreck since a California city tried to seize intangible personal property from Al Davis (that is, his ownership of the Oakland Raiders).

“Despite the Raiders’ having achieved one of professional football’s greatest winning records while located in Oakland, the City of Oakland has now brought the Raiders to the appellate courts of California more often than the Raiders took the City of Oakland to the Super Bowl.”
http://www.lawlink.com/research/caselevel3/65475